There’s ‘No Guarantee’ The Price of Bitcoin Will Fall Post Block Reward Halving
There are only 6 days left for the halving and bitcoin’s price is trading under $9,000. While the price is holding up nicely, volume on exchanges is also strong at around $1.5 billion, as per Coin360.
The amount of bitcoin trading on top ten crypto exchanges with real volume has declined from last week’s pump when it reached above $4 billion but we are still much higher than the volume we were recording prior to the march sell-off and coronavirus pandemic.
But the network fundamentals are also strong with the hash rate jumping to a new all-time high this month with the difficulty also close to reaching new highs.
This raises the concern of bitcoin sell-off immediately after the halving event.
Older models will need to be shut down
Industry commentators are calling for a drop as post halving, the breakeven cost of mining bitcoin would double while miners’ profitability will get reduced by 50%. This has some speculating that about 30% of the unprofitable mining operators may shut down their rigs.
But according to analyst Mati Greenspan, there is no guarantee that mining operators will need to sell some of their stash to upgrade their hardware post-halving which makes their old rigs unprofitable.
This is because it is “feasible” that either miners have already sold their holdings during the BTC highs around $10,000 or they have already begun upgrading, as such no need to sell.
As per the Bitcoin ASIC Cost indicator that shows at which level each rig is making a profit, “most of the older models have been operating at a loss over the last two months and have only just returned to profitability,” wrote Greenspan in his daily newsletter.
It is likely once the halving occurs, many of these older models will need to be shut down.
As hardware profitability Jumps
The drop in the hash rate will depend on how high the price goes but “it's hard to imagine it rising to the level needed to avoid a major hash plunge.”
S17+ machines will be profitable at just under $10,000, S17 at about $12,700, S15 $16,000, and S9i $17,260.
So, halving is expected to have a lot of these old machines get “mothballed.” The hash rate will also decline but in two weeks, the difficulty will be adjusted to make it easier to mine bitcoin.
Greenspan however, isn’t sure about how powerful these new rigs coming online are, already there have been reports of Bitmain’s new S17’s defection rate jumping to 30%, which is usually roughly 5%.
Could take months for this to play out
One thing Greenspan is completely sure about is that halving is not priced in.
Because it needs to take into account all the ins and outs and the pros and cons of each individual player in this vibrant market. Greenspan said,
“It could take months for this to play out and for the price to reflect the massive change in the ecosystem.”
Chris Bendiksen, head of research at CoinShares is of a similar opinion as he said, “the likely outcome of the halving is a positive supply-side impact over the mid- to longer-term.” He added,
“Macroeconomic tailwinds presented by global governments and the existing and growing inflows into passive bitcoin investment products we’re currently observing could cause a perfect storm for the bitcoin price.”